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Saturday, January 30, 2010

Solomon Dwek De-Composing: Fact or Fantasy, or Both?

The first corruption trial in the series of "Bid Rig" arrests started this past week in Newark federal court.   Several dozen people were arrested in July 2009, and there have been others who were not arrested at the time but have since pleaded guilty to crimes in connection with the investigation.   It is likely there will be others, as yet unindicted, to be indicted or who will plead guilty.  
The investigation centers around a series of videotapes made by a pretty bad man named Solomon Dwek.   Mr. Dwek admitted to what amounts to a lifetime of lying when first presented on the witness stand.   Mr. Dwek has previously admitted to the crime of bank fraud, but compared to his.other acts, it seems clear his lawyers engaged in some creative fact-bargaining (getting the government to ignore plenty of other bad acts) and the government, for reasons unclear, acquiesced.
The tapes will be the primary evidence.  Soliciting and accepting bribes are serious crimes which undermine the very legitimacy of our government.  (In Hudson County, New Jersey, those concepts may be novel and quaint.  Hold your laughter.)   However, the credibility of Mr. Dwek is still an issue.  He has to testify to provide the foundation for the evidence.   So far, he has not been the most convincing, at least to one astute courtroom observer writing in the Star-Ledger.
Mr. Dwek basically admitted on his first day in court that he was performing.   The choice of that word does not suggest the concept of truth.  It very clearly suggests the concept of fiction, in the Broadway show context. 
This raises a disturbing series of questions.   First, the naive question:   Are Mr. Dwek's statements true
More distressing is the following chain of questions which flow out of the first one:  Why did the federal government use this guy to go undercover?   Weren't there other law enforcement agents available?  What about honest private citizens who pass a background check?   

Or, was there a particular reason to select Mr. Dwek?
Here's the central question:  Was Mr. Dwek chosen, in spite of his admissions to ripping off friends and family and running a Ponzi scheme, chosen to be the bribe-giver, not because he could chronicle the truth, but (precisely) because he was willing to say anything the government needed him to say for its case?   In essence, was Mr. Dwek the perjurer-for-hire of the day?
And a global question:   Are these arrests and cases the product of a results-oriented, conclusion-first, ends-justify-the-means investigation that started with the assumption (or the hope) that certain politicians were crooks and then just tried to manufacture certain evidence to hopefully convince a jury that there was a crime? 
Here is a current Star-Ledger story with direct links to transcripts and videotapes.   Judge for yourself Ms. Leona Beldini, whom, lest we not forget, is the defendant in this first case.   Ultimately, it is the propriety of her actions which is the issue.  Ed Cheatam has already pleaded guilty in this investigation, and Jersey City Mayor Jerramiah Healy likely has a role in this investigation which has yet to be revealed.   
Cleaning up corruption is admirable and desirable.   And it is necessary, especially in Hudson County, NJ where there is a strong history of outright corruption and an equally strong tradition of institutionalized favoritism, special treatment and other forms of line-jumping.  But using someone who is arguably dirtier than dirt is a recipe for cross-contamination.  These "investigative tactics" undermine the legitimacy of and public faith in our law enforcement authorities and their adherence to basic Constitutional rights.   Truth and justice matter, at least in the America we are taught exists.   

Should some of these "Bid Rig" defendants turn out to be really crooked, the last thing Hudson County needs is a witness like Dwek who may make these crooks look like sympathetic figures.  That might be the worst possible outcome this first trial may yield.     

Friday, January 29, 2010

Surprising Privacy Expert Witnesses: How Illegal Aliens Can Teach Us To Preserve Our Privacy

The fields of "privacy law" and "Internet law" are relatively new, undefined (with uncertainty over who is qualified to define them) and expanding (to the extent they can be defined).   As a consequence, some lawyers cannot find "expert" witnesses in these fields without either some difficulty or discomfort with the level of expertise these "experts" purport to have.
For the uninitiated:  Privacy law and Internet law largely concern the vulnerability of people to abuses by others of existing and emerging technologies and media.
The issue sometimes arises regarding how to best protect oneself from being vulnerable.   Who is qualified to speak with expertise on such a subject?  
I contend that New York City has many experts on this subject.   About one million, give or take a few hundred thousand.   They are illegal aliens.   They are here without documentation, without ATM cards, without other cards with magnetic strips or infrared strips, no REAL ID cards, no authentic social security cards (they can get a taxpayer identification number from the IRS with few or no questions asked, as the government will gladly tax you if you're illegal) and no credit cards.   They don't have e-mail accounts or Facebook or LinkedIn accounts.   They don't have bank accounts under their real names.   They don't transact business under their real names.   Most often, they do not drive.  They limit their interaction with the authorities, avoiding even conventional mass transit in favor of ethnic-run (and privately-operated) jitney buses and cabs. 
And, unlike most stupid Americans who gladly trade their privacy for a smidgen of convenience and the allure of a perceived discount, these aliens will happily pay for the ability to remain undetected.  (Remember Dixon's Rule #34:  Privacy and convenience operate in an inverse relationship to each other.) They will eschew state-run mass transit for ethno-centric, privately-operated jitney buses; avoid conventional banks for ethno-centric or church-centric informal organizations which operate on trust without contracts (of course, at the depositor's risk) and will buy these "dollar cards" for international phone cards, eschewing even telephone land-line service. 
In short, they're "off the grid."   The government cannot use its myriad of technologies, legally or otherwise, to track these people.   They are "underground," even though they are in plain sight to those of us on the ground.   They've been here for years; some, for decades.   Some of them make more money than you do!  And they will remain here, because they know that to get connected to the grid places them at immediate risk of detection, detention, imprisonment and deportation.
Who needs another egghead when the neighborhoods are teeming with people who can tell you how they've avoided immigration agents for decades?

Monday, January 25, 2010

Christie's First Tax Hike Threat

The paint on the front door is still wet, but New Jersey's new Governor Chris Christie has already made his first tax hike increase, as this Associated Press report (picked up by the Star-Ledger of Newark, NJ).   The report indicates that Christie will increase certain taxes on business unless the federal government comes up with funds to replenish the State's unemployment insurance fund.  

While it should be noted that the State is required to replenish this fund, the option of making spending cuts elsewhere in order to free up funds for unemployment insurance was not mentioned as an alternative.

Going to the federal government and saying you will blame it (and its Democratic Chief Executive) for raising taxes unless it gives you money is the equivalent of what on Wall Street used to be called greenmail.  Governor Christie is essentially saying: pay us or otherwise we'll raise taxes -- and blame the Democrats for it.  This type of pressure (which may not be entirely appropriate anyplace except in politics where it appears to be common practice -- wait, isn't that what Joseph Ferriero's lawyers were saying this past summer?) reminds us of how those companies got those deferred prosecution agreements back while Christie was U.S. Attorney, no?

The prescience of conservative Star-Ledger columnist Paul Mulshine, who consistently questioned Christie's "conservative" credentials on many issues including taxes, has been demonstrated by this development.  It only took six days -- or less than four full business days.   Amazing.

Announcing the Christie Doctrine:  I will raise your taxes if I can blame someone else for it.

In politics, this is called passing the buck.   A certain former hockey general manager would call this being a gutless puke.  (Trivia: Name the GM.)   Common people have a simpler explanation:  He lied.

Eric Dixon is an attorney practicing in New York and New Jersey and handles ballot access matters for candidates and public organizations.   Mr. Dixon handles matters involving litigation, dispute resolution, investigations and due diligence directly with clients and indirectly when engaged by other professionals. 

Sunday, January 24, 2010

Running For Office? The FBI May Assume You're A Crook

The Bid Rig trials begin tomorrow in Newark federal court with U.S. v. Beldini, heard before Judge Jose Linares.   Barring a sudden guilty plea, this will be the first trial in which we will get to examine the credibility of star government informant Solomon Dwek.   Of course, it's not just Dwek's say-so; government sources have promised that there are wiretaps implicating Jersey City Deputy Mayor Leona Beldini.

Mr. Dwek enjoyed prodigious success enticing candidates and their associates to take bribes, if the representations of law enforcement are to be taken at face value.  In the case of Hoboken candidates for mayor of that town, Dwek reportedly approached each of the three candidates.  The one candidate who accepted the bribe, Peter Cammarano, is among the indicted and resigned as mayor soon after his arrest.  He awaits trial.

Note that each Hoboken mayoral candidate was approached.  This one fact supports the inference that every political candidate in Hoboken in 2009 was a potential crook in the eyes of federal law enforcement.  

It is disturbing to think that the FBI and Justice Department may presume that any political activist or candidate should be subjected to some sort of "honesty test," and more disturbing that law enforcement may assume that any political candidate, consultant or activist -- especially in a given jurisdiction or political organization -- is a crook.   There are community-minded individuals who are surely viewed by someone with a badge as unindicted co-conspirators in a scheme they can't see, touch or prove but which they assume exists.   On one level, this should be absolutely insulting, to both the candidates and their communities.   Certainly, on a public policy level, this has to discourage "the best and the brightest," and certainly some very honest and well-meaning people, from getting involved in their communities.   (Hmmm.  Could that be the intent?)

(Special shout out to Herbert Shaw, a gadfly in Hudson County who actually runs, on a regular basis, under the banners "Politicians Are Crooks."  This is both funny and totally true.)

On the other hand, Dwek's success in finding corruptible "marks" in Hudson County, New Jersey tends to cast a dark cloud over a substantial portion of the public employees (whether elected, appointed or merely rank-and-file) of that county.  There is, to some degree, a culture of entitlement, of special treatment, in Hudson County and in much of New Jersey's small towns.  This attitude tends to lead to illicit acts, to abuses of power, and to acts which qualify as federal crimes.

Hudson County is renowned for the lack of integrity of its public employees.  The sense that candidates in Hudson County are presumed to be guilty of something without proof is insulting; however, the fact that so many Hudson County Democrats were ensnared in this investigation must be highly disturbing if for no other reason than it supports a presumption I consider abhorrent.

Eric Dixon is an attorney in New York and New Jersey who handles civil litigation, investigations, due diligence and dispute resolution for clients directly and also accepts engagements from other professionals.  Mr. Dixon is experienced in ballot access matters, corporate governance and securities compliance.  

Is Solomon Dwek Credible?

The first trial emanating from the legendary Bid Rig corruption busts in mid-2009 starts tomorrow (Monday) in Newark federal court, when jury selection (in legal parlance, the "voir dire") for former burlesque dancer-turned-real estate broker and Jersey City Deputy Mayor Leona Beldini begins.

The presentation of this case by the Justice Department should be measured against new guidelines it issued earlier this month.   The guidelines, as revised, make for very interesting reading. 

Beldini is supposedly caught on a federal wiretap talking corruptly with the erstwhile Mr. Dwek.   However, there are going to be questions regarding Mr. Dwek's credibility.  This is going to be interesting. 

Dwek is a man who, among other things, tried to pass off two multi-million dollar bad checks, got caught (he pled guilty this past fall), and then, fearing a likely long prison sentence, worked assiduously for the next couple of years to implicate anyone and everyone around him.   Religious and community ties were no barrier; Dwek approached -- and was able to implicate -- a host of rabbis within his own Orthodox Jewish community, and all manner of politicians, particularly in Hudson County.  

For his efforts, Dwek has likely been ostracized from his congregation, the larger religious community in Deal, NJ and is probably a candidate for witness protection. He will be sentenced, probably after he is no longer useful as a  "cooperating witness" for the Justice Department.   This will occur only after several lawyers, including Ms. Beldini's counsel Brian Neary (aka "Bow Tie"), take their shots at Mr. Dwek.  

I wonder whether Mr. Dwek's willingness to try to compromise virtually everyone around him, and risking ostracization from the tightly-knit Orthodox Jewish community (or worse), indicates either sheer desperation to escape long jail time, or some sort of pathological narcissism.  Dwek has almost literally thrown away everything in his life, first by committing his crime and secondly by damaging almost every relationship he has with people and institutions around him.   This damage is not limited to himself; consider the damage he has done to his own family.   Dwek's father is a rabbi in the Jersey Shore town of Deal (in which many of his "marks" also resided, at least part-time), and Dwek has a wife and children. 

I think there are substantial questions of fact as to his credibility, which may become very relevant if the wiretap tapes prove to be faulty, ambiguous, vague, uncertain or in any way less than what we've been promised by the federal authorities.   I expect these questions will be raised, not only by defense attorneys, but also by the various presiding judges in these cases.   Beldini's case is going to be heard by Judge Jose Linares, sitting in Newark.  It is going to be very interesting this week.

 Eric Dixon is a New York lawyer who has been practicing law since graduating from Yale Law School in 1994. Mr. Dixon cautions that this article is not legal advice. Mr. Dixon has handled election law and other matters for over two dozen political clients, and also handles corporate investigations, due diligence and sensitive matters including crisis management.  Mr. Dixon is available for consultation or comment at and 917-696-2442. 

Saturday, January 23, 2010

Christie Already On Wrong Side of Supreme Court

A few days ago, and only one day before the John Roberts-led Supreme Court issued its opinion in Citizens United v. FEC striking down limits on corporate and entity political contributions on First Amendment grounds, new New Jersey governor Chris Christie signed an executive order banning unions from making political contributions.  (See my earlier commentary on the decision.)

Say what you will about unions, good or bad, but this was a blatant attempt to target one class of speakers and eliminate their rights to political speech, and for an equally transparent, political purpose.  This is essentially a content-based prohibition on free speech.   It is so antithetical with basic Constitutional values upholding free speech and expression, and is so fundamentally unconstitutional, that it raises valid questions about new Governor Christie's respect for other constitutional values like equal protection, due process, right to counsel, and so on.  

Remember that the ban on unions' contributions has a political motive to it (don't hold your breath waiting for an admission of this).  New Jersey readers should be concerned about what's in store next.  If the Christie Administration follows the principle of "the ends justify the means," this disregard for Constitutional values is going to have troubling implications for New Jersey residents that will dwarf concerns about the budget deficit or high taxes.  

Some New Jersey conservatives have been blinded, I suspect, by their disgust for former Governor Jon Corzine.   High taxes are always a bane of any society.  Any "conservatives" with a conscience -- or a brain -- should realize this. It only took days for the Republican governor Christie to show himself to be on the wrong side of the conservative, "Roberts" Court.

Eric Dixon is an attorney practicing in New York and New Jersey. He practices in, among other things, the field of ballot access election law and also is knowledgeable on securities compliance and corporate governance matters. Mr. Dixon is available for consultation or further comment at 917-696-2442.

Friday, January 22, 2010

The Death of Pulse 87 and Air America


This week, the niche music genre of "trance" or techno-dance music (or whatever it's called now) took a serious blow in the New York media market.   For the last two years, station WNYZ held the UHF frequency available at the very bottom of the FM scale -- 87.7 -- and operated under the tag name "Pulse 87."   Then, in late October (and after not paying the bills), Pulse 87 folded and the station reached an agreement to simulcast a Long Island station's programming (your "Party Music Leader").  The Long Island station changed its playlist a little (there was crossover) and even hired a Pulse 87 deejay for evening drive-time, with a strategy to use the simulcast to grow its listener base beyond Suffolk County and into all of New York City and a substantial part of lower Hudson and Northeastern New Jersey (i.e., another 12-14 million people), trying to capture the "Pulse 87" audience and improve its ad revenue.  The advertising potential would seem to be tremendous.   At first glance, one would think this was a potentially brilliant move.

Earlier today, the Long Island station abruptly stopped simulcasting on 87.7 FM.  The station's general manager cited the uncertainty over government regulation of the airwaves as the reason.   In essence, he wrote that station management was unwilling to invest in developing an audience for a station, in the New York media market, because the federal government (through the Federal Communications Commission) could re-regulate its 87.7 UHF frequency to prohibit radio broadcasts and reserve it for television.  This is very significant.   In other words, why invest to build an audience when the government could take the 87.7 frequency off the air at virtually any time?

In fairness, the Low Power television frequencies, which are right below 88.0 megahertz, were not intended to be television broadcasts in name only with the real purpose of being an FM station, available on FM radio, while really being outside the FM range.   There are several stations across the country in the 87.0-87.9 megahertz range.   The real issue, one suspects, is the unavailability of coveted FM band frequencies, particularly in major markets, driving enterprising broadcasters to seek alternate ways of getting to their audience.  It is not clear whether the FCC allows this practice, and much less, whether it will tolerate the practice to continue.  On the other hand, there are many low-audience, public or college stations which are taking up very valuable conventional radio frequencies, driving up the price of available frequencies and also limiting the commercial diversity for the regular, terrestrial radio audience.   Perhaps this practice ought to be halted, before so-called "wildcatter" broadcasters in the 87 FM arena get regulated out of business.   After all, the "free market" is speaking, when stations like Pulse 87 are developing significant audiences despite their placement on the dial.

Business needs stability and certainty.   Business owners and entrepreneurs will be hesitant to start, expand or even maintain their enterprises when government regulations are onerous, arbitrarily enforced or unevenly applied to distort market competition,  or when courts will not enforce basic contractual rights or apply the laws consistently or predictably.    Simple uncertainty over future government regulation killed a growing dance radio station in what is merely the nation's top media market with a base population of at least 12-15 million people.   This should be absolutely appalling.


The Air America network abruptly ceased programming on Thursday afternoon, filing for Chapter 7 bankruptcy.   Air America had started in 2004 as a left-wing counterpoint to the so-called right-wing talk radio hegemony most often (and somewhat incorrectly) identified with Rush Limbaugh.

Having perused this network out of sheer curiosity, I was initially alarmed at how b-o-r-i-n-g the initial hosts were.   Al Franken was painful to listen to, Janeane Garofalo and Montel Williams were even worse.  (It seemed, the bigger the star, the more insufferable the show.)  However, some of the "no-names" seemed both really entertaining and surprisingly informative; it's time to commend Randi Rhodes (who belongs on New York radio), Rachel Maddow (who got her start with a one-hour slot on the network), Thom Hartmann, Alan Colmes and Lionel, and a brilliant (if sometimes way too far-left) weekend radio show called "Ring of Fire" with Robert Kennedy and Mike Papatonio.  Some of the aforementioned were surprisingly even-handed, attacking Democrats from the progressive side with little hesitation.  Maybe the next time this concept is launched, it will be adequately capitalized.  

Eric Dixon is an attorney in New York and New Jersey with significant experience in corporate transactions, regulatory and compliance matters.   He handles corporate investigations, due diligence, litigation, negotiations and dispute resolution. 


Thursday, January 21, 2010

Supreme Court Campaign Finance Ruling Will Boost Corruption, Help Corporatist Interests

The Supreme Court earlier this morning issued an opinion in the Citizens United v. FEC case, striking down some long-standing limits on corporate/organizational free speech (namely, political speech) and in the process expanded the scope of the First Amendment.  Entities are now recognized to have free speech rights.   This is an extension of the right to association under the First Amendment; the right to associate becomes more "real" when the association can speak, or speak with a stronger voice.  

But beware of the unintended consequences -- although dealing with those is first the proper province of Congress, not the courts.   I like the decision -- but I am also fearful of these unintended consequences, some of which will surprise you.

Corporations and other entities will now be able to spend and speak more freely (and much more) on issues of interest to them.   These entities, which already speak plenty through various lobbyists and industry organizations (which in turn have their own lobbyists), will now be able to speak that much more.   Theoretically, this should in the end help shareholders of the companies which are the biggest, most powerful and most influential.   However, the enhanced ability to speak will lead to more competition to be heard.   As with any competition, there will be winners and losers, and the "losers" whose speech may be drowned out will tend to be those innovative and too-new (or too-controversial) companies.   In addition, I can see companies whose products, services or business models are too effective in taking market share away from the established players being attacked with this enhanced speech, or even suffering enhanced state scrutiny through the arbitrary and capricious (and unequal) imposition of results-oriented, regulatory and prosecutorial "scrutiny."  (Read: You threaten the big boys.  Close up shop or we'll destroy you.)

As for shareholder interests, they will be protected only if corporate management and the boards of directors act responsibly with this new power.   History tells us that the range of reactions is all over the map.   There are always bad apples, and you will soon read stories of wayward corporations abusing this new spending power and wasting their shareholders' money.   Down the road, call this a stimulus for the securities fraud plaintiffs' bar.

On the purely political candidate side, the enhanced speech of corporate players will mean that candidates on both sides (sorry, third parties, this doesn't include you) will have the ability to raise more money, but the need will grow even more.   The pressure to keep up with the competition will increase substantially.   This pressure will lead, in short order, to greater malfeasance and eventually, to outright corruption.   It is an unintended consequence.   Raw ambition will drive this trend, with corporate money being the rocket fuel. 

SPECIAL NOTE FOR NEW JERSEY:  The day before Citizens United was issued, new New Jersey governor Chris Christie signed an executive order banning unions from making political contributions.  This is simply antithetical with basic Constitutional values upholding free speech and expression and is a transparent attack on certain speakers for the presumed content of their speech.   This is fundamentally unconstitutional.   Any "conservatives" with a conscience -- or a brain -- should realize this.   It only took days for the Republican governor Christie to show himself to be on the wrong side of the conservative, "Roberts" Court.  

Eric Dixon is an attorney practicing in New York and New Jersey.   He practices in, among other things, the field of ballot access election law and also is knowledgeable on securities compliance and corporate governance matters.  Mr. Dixon is available for consultation or further comment at 917-696-2442.

Tuesday, January 19, 2010

Don't Believe the Hype: The Real Estate Market Is Not Healthy

The real estate market is not healthy.   The excesses and sheer stupidity of some investing decisions have yet to be worked out.   The New York Times will have a prominent story in its Tuesday, January 19th edition, Metro section: click here
Analyzing the housing market is like doing triage on a patient.   Here is my take:  The patient may not be bleeding as badly as before, but he is still bleeding to death, simply not as quickly as before.   Unless the bleeding is arrested and the patient stabilized and able to recover, there is no recovery, only a slow march towards death.   This is the same situation facing countless small businesses and homeowners.   While there may be "improvement" according to certain economic indicators (take your pick), that improvement is often measured against some ghastly late-2008 / first quarter-2009 numbers.   The parachute may have opened on the economy, but the patient is still failing and is going to hit the ground.  
By the way, the Times' story detailing the sad conditions at an investor-owned apartment building in The Bronx illustrate the dangers of the moral hazard.   A bailout here will not help any of these tenants.  It will help the absentee investors, who have virtually no incentive to plow a penny back into the building.  The tenants will only be helped when someone comes in (either a government agency or government sanctioned private-public special entity to help manage the building, in the equvalent of a trustee/custodian relationship) and is able to repair, renovate and maintain the building in the proper condition.   The proper balance of incentives to the investors, lenders and tenants must be struck.  
Eric Dixon is the author of the Crime, Politics and Policy blog and also practices law in New York and New Jersey.   Mr. Dixon has substantial experience in serious, high-level negotiations in business and commercial matters.   Mr. Dixon also takes a real-world, practical approach to these situations in his practice.   Mr. Dixon is available for consultation and is reachable most of the time at 917-696-2442.

Sunday, January 17, 2010

Big Change in New Jersey Coming

New Jersey is about to see if its fears hopes for cataclysmic change will come true when new Governor Chris Christie is sworn into office on Tuesday, January 19th.

Christie ran as a Republican promising serious change to a New Jersey which had become a national punchline (thanks to its proximity to New York City and "Saturday Night Live" writers) for corruption.   Indeed, Christie adopted the mantra of fighting a "culture of corruption" both as United States Attorney and as gubernatorial candidate.  

The promise of cultural change has thus far missed -- other than on this blog -- the need for a functioning independent press in New Jersey.   Most of the corruption problem in New Jersey may be traced, in one way or another, to an arrogance borne of a small-town, "everybody-knows-us" attitude which breeds a sense of insularity and "special treatment."   The "don't you know who I am" tantrum thrown by former Attorney General-for-a-few-months Zulima Farber in 2005 may have led to her resignation (at the behest of then Governor Jon Corzine), but had this occurred in New York, Farber would have been suspended within days and getting vilified daily by the tabloid press.    It is this killer-instinct press which New Jersey lacks, and which allows its more daring public officials to believe they can operate with a fair amount of impunity and without serious scrutiny.

The major reason for New Jersey's culture of corruption is, in my opinion at least, the myriad of small towns, interlocking boards and authorities and the spiderweb of bureaucracies which offer opportunities for "part-time" salaries, pensions, perks, rolodex-building and other activities.   Again, this does not happen to the same degree in New York City (whose population is roughly equal to that of all of New Jersey), because of the second reason:  the press there is simply far more active than it has been in New Jersey.

New Jersey's major press outlets (the Star-Ledger, the Record of Hackensack, and the Asbury Park Press) have all been suffering and cut back their reporting corps.   The Star-Ledger and Record now share much of their content.   The result is that there are very few intrepid writers on the beat to entertain, track down and reveal instances of gross misconduct.  New Jersey residents have seen the result.   Now, enough residents got fed up with the corruption to throw out of office a non-machine Democratic Governor and elect a Republican with no apparent platform other than corruption-fighter.

If all Christie does is fight public corruption, that alone may improve the quality of life in New Jersey.   However, the corruption is cultural, systematic, and endemic.   It touches all corners of public life.   This will be a tough task, as tough as it is necessary.   Without at least diminishing the corrosive nature of corruption in New Jersey, it will be difficult to reduce the strangehold of the public sector managers upon the decisionmaking at all levels of government.   Until the highly-paid, multi-job-holding managers get their responsibilities and powers reduced, state spending will not be controlled, budget deficits will continue to grow with little hope of being controlled and the real tax burden upon the rest of New Jersey will continue to increase.  If these trends continue, state residents and businesses which have the ability to move will become more inclined to do so.   Some of this movement may even occur back to New York City, reversing a decades-long trend.   Hence, the next few months and years under the new Governor will be critical.

Friday, January 15, 2010

New Jersey Woman Protects Daughter, Gets Prosecuted By School

A parent who stands up for her school-age daughter and curses out a school principal is facing prosecution in Hasbrouck Heights, NJ for disorderly conduct, according to this  report in the Record of Hackensack, NJ.
The school district apparently drew the mother's ire after her daughter was humiliated when some male classmates pulled her pants down in front of other students.  The mother was not satisfied with the school's response at an anti-bullying forum and felt she had to stand up for her daughter.   The school district responded -- not by addressing the boys' behavior -- but by filing the criminal complaint against the mother.
The school district calls this woman a criminal.   I say she is a good mother.  The girl should be proud to have a mother who stood up for her -- albeit in a less than diplomatic way.   While the mother could be criticized for her manner or form, the school officials should be called onto the carpet to explain their decision to prosecute the mother.  Do not hold your breath. 
New Jersey has hundreds of small towns, and there is little effective accountability.   Hence, public employees often adopt a sense of entitlement and believe they can act with relative impunity.  The school district's decision to go after this woman reeks of a clear abuse of authority where someone on the public payroll is using taxpayer money to satisfy his ego and bully a poor woman whose only desire was to protect her daughter, and whose real offense seems to be that she embarrassed some officials.   Several years ago, a former state Attorney General named Zulima Farber was forced to resign by then-Governor Corzine when she threw her weight around to help her boyfriend, another lawyer named Hamlet Goore.
Public criticism is part of the territory for public employees.   The thin-skinned should go to the private sector.  Until then, we will see these bullying tactics by these small-town vassals with inflated egos and images of themselves.  And the funny thing is, these same officials who like to push people around are the same punks who cannot take it when someone gives them their own medicine.    They seem able to throw a punch, but can't take one back.
New Jersey recognizes a state tort action for "malicious prosecution" and it would be worthwhile to see if such a case can be brought on behalf of this poor woman.   Some of these punk public employees need to be thrown into a boxing ring and told it's an ultimate fighting match, not a sparring session with a punching bag.

Thursday, January 14, 2010

Free At Last! Gotti Jr. Won't Be Prosecuted Again

The Department of Justice announced Tuesday that it will not make a fifth attempt to convict John Gotti Jr. of any of a variety of crimes which it has alleged he committed.   Gotti Jr. recently survived a fourth trial in which, again, the jury failed to reach a unanimous verdict.   Read the upcoming (Thursday) New York Times article here.

The allegations against Gotti Jr. have been very serious, and some of the hung juries have tilted sharply in favor of conviction, but failed to reach the required unanimity.   Nonetheless, the government's persistence started to make Gotti Jr. a sympathetic figure in at least some eyes.   Perhaps it is this perceived shift in public opinion which is prompting the Justice Department to decline to prosecute on "old" crimes.

Naturally, if there are "new" crimes, one may expect Mr. Gotti to quickly receive a so-called "target" letter.

Saturday, January 9, 2010

Are Marc Dreier Colleagues In Trouble?

A huge lawyer-run Ponzi scheme has been unfolding recently in South Florida, where uber-lawyer Scott Rothstein has been accused (and charged) with running a $1.2 billion criminal enterprise using his law firm.   As today's Sun-Sentinel (Fort Lauderdale, FL) reports, some of his colleagues may have criminal culpability.

The Rothstein case echoes the case of New York Park Avenue lawyer Marc S. Dreier.   Dreier was the lawyer who travelled to Toronto to impersonate a pension fund manager and got caught in December 2008.   This would -- should -- have been huge news, and has received fair attention, but was rapidly overshadowed by the Bernie Madoff scandal which unfolded only days later.  (Since then, more detritus has appeared and the current pecking order seems to be: Madoff, Allen Stanford, Scott Rothstein and Tom Petters.) 

Dreier quickly pled guilty to running a multi-hundred million dollar Ponzi scheme out of, and to fund, his eponymous firm Dreier LLP during the years 2002-08.  In July 2009, Manhattan federal judge Jed Rakoff sentenced the 59-year-old Dreier to "essentially life" with a 20-year prison sentence.  At least two colleagues of Dreier (of whom one was a lawyer) have pled guilty, and the Rothstein case could indicate that Dreier's colleagues and employees could share criminal exposure as well.  

Eric Dixon is a New York lawyer and strategic consultant for businesses, political campaigns and individuals. Mr. Dixon is available for comment or consultation at and 917-696-2442. 

Thursday, January 7, 2010

Judges Wanted: Trial Experience Not Necessary

There are some very fine individuals and lawyers in New Jersey who want to be judges, but who are not "connected."  (Insert your own Orwellian doublespeak at your will.)  Now a news item came to my attention which indicates that in New Jersey, having no trial experience is not a barrier to becoming a judge!

Thanks to for breaking this (link here); more thanks to State Senator Loretta Weinberg for having the fortitude to question Esther Suarez's credentials to be a judge.   (A fine lawyer she may be, but a judge should at least have some experience appearing before other judges before wearing the black robes, no?)

Being that this is New Jersey, the rules may be different.  "No prior experience" is not necessarily a disqualification.   Chris Christie had no prior criminal experience and apparently limited civil litigation experience, but that didn't stop President Bush from appointing him as United States attorney in 2002.

What does the New Jersey State Bar Association think about this?

Blowing the Whistle, or Begging For Mercy?

The latest twist in the saga of UBS banker Bradley Birkenfeld involves Birkenfeld's efforts, on the eve of his scheduled date to report to a federal prison, to have the Justice Department's Office of Professional Responsibility (OPR) investigate the prosecutors in his case.

The basis for the claim is that the prosecutors ignored Birkenfeld's efforts to report wrongdoing to various other federal government agencies and a Senate subcommittee, charged him with crimes and misrepresented his efforts at his sentencing hearing. 

A link to today's Daily Business Review covers this story.

Birkenfeld is claiming to be the latest white knight or whistleblower du jour.   However, not every whistleblower is innocent.   As a recent book by Boston criminal defense lawyer Harvey Silverglate chronicles in "Three Felonies a Day," wrongdoers have some powerful incentives to "compose" testimony in order to seek reductions in jail time or avoid prison altogether, and this practice seems to be met often with a blind eye or a wink and a nod. 

(Ed. Note:  Silverglate's most diplomatic language still conveys the message -- if not the outrage -- that prosecutors and investigators are tailoring testimony and sanitizing their witnesses' credibility in order to build cases in spite of the truth or how evidently false the stories are.  No wonder the Justice Department just issued new guidelines for its prosecutors on broadening what is considered exculpatory or impeachment evidence and sharing it with the defense; see my earlier article here) 

How do we know that Birkenfeld is a good guy?   Remember, this man -- who is a Swiss national -- admitted to crimes.   Being afraid of jail time may be a rational response, but does not excuse lying.   If Birkenfeld is innocent, that means he lied before a federal judge when he pled guilty.   The fact that this man may be particularly useful in exposing all sorts of tax crimes by very rich people does not make him a saint: it merely means he was in a position to reveal crimes and now, on the eve of incarceration, finds that information to be particularly useful.   

The New York Daily News' Juan Gonzalez wrote in his column yesterday that Birkenfeld deserves a statue instead of a jail sentence.   This is wrong.   If so-called good deeds excuse all bad deeds, Bernie Madoff would be at home wearing an electronic monitoring device right now.  

Several years ago, a would-be whistleblower who worked as an accountant for Enron claimed the same hero mantle.   Sherron Watkins appeared before a Senate committee, got plenty of positive -- and uncritical -- publicity, and launched a new career involving ethics training for corporations.   Then came the trial of Kenneth Lay and Jeff Skilling (both of whom were convicted).   On the stand, it was revealed that Watkins engaged in illegal, criminal insider trading and received immunity from prosecution.  

There are many totally honest whistleblowers who seek no publicity and derive no benefit from their honesty except a pink slip and, sometimes, outright ostracization (a/k/a being blackballed) from their industry or community or religious organizations.  The Birkenfeld and Watkins sagas should remind observers that not every person who claims the golden halo of the whistleblower has clean hands.  In my opinion, the whistleblower advocacy groups do themselves -- and especially the innocent whistleblowers -- no favors by hitching a ride onto the wagons of criminals who discover morality only on the ride to the courthouse.


Mortgage Loan Principal Reductions and Rewarding Responsible Behavior

The insanity over trying to keep 'underwater' homeowners in their homes is growing.   See the latest prominent article from Bloomberg News.    I have a much different solution to this "crisis."  As Crime, Politics and Policy has said before (including earlier this month), reducing the mortgage principal for some homeowners to create new "equity" is the equivalent of giving these owners a check for the amount of the reduction.  It is an underwater-homeowner bailout, pure and simple.   The problem is that the bailout of this select class -- many of whom knowingly assumed outsized risks which many other would-be homeowners were not willing to do -- will benefit those who took risks, at the expense of others who did not take any risks.

This is a moral hazard.   Many people wanted to buy homes and were "priced out" during the post-9/11 price bubble.   These would-be buyers often lost out on bidding wars, time and time again, because they were unwilling to stretch beyond their means for a house and lost out to the ultimate purchasers, many of whom intentionally threw caution to the wind with the riskiest mortgages they could get in order to minimize their down payment and/or monthly payment.   Now the responsible "losers" in the 2002-07 bidding wars, the ones who refused to take negative amortization or one-year adjustable rate mortgages because they recognized the downside risk and (very rightfully) were uncomfortable, may lose out a second time to this select class of "victims."

I have a fair proposal.   Allow all homeowners to qualify for a home loan principal reduction.   I propose that the homeowner be allowed a one-time reduction of double (or triple) the amount of a one-shot lump sum payment.   This would give a homeowner who pays $25,000 a $50,000 principal reduction.  The bank suffers a current writeoff and its future cash flow from mortgage payments will be reduced, but its balance sheet pain is offset by an immediate and significant -- and very real -- cash infusion.  Unlike TARP, this money would not have to be paid back to the government.   Talk about helping banks' liquidity, especially when there's a credit crunch.

I believe this principal reduction plan should be implemented anyway, both to give real relief to banks (without pounding the taxpayer) and to reward responsible homeowners at a time when popular faith in playing by the rules seems to be at an all-time low.   It is important to reaffirm the sense of fairness and equality in our society.   Otherwise, the crime waves of tomorrow, engaged in by people who may claim a degree of moral righteousness (think Robin Hood), may dwarf anything we've ever seen.   This is how we keep 21st Century America from devolving into 20th Century South America.

 Eric Dixon is a New York lawyer who has been practicing law since graduating from Yale Law School in 1994. Mr. Dixon cautions that this article is not legal advice. Mr. Dixon has handled election law and other matters for over two dozen political clients, and also handles corporate investigations, due diligence and sensitive matters including crisis management.  Mr. Dixon is available for consultation or comment at and 917-696-2442.

Wednesday, January 6, 2010

Will Revised Justice Discovery Guidelines Affect "Bid Rig" Cases Using Solomon Dwek?

Recent cases have prompted the Department of Justice to issue new guidelines for its line prosecutors around the country regarding the sharing of evidence which could be potentially exculpatory or useful for impeaching government witnesses.   These cases, such as but not limited to the convictions of former Alaska Senator (and former U.S. Attorney for the District of Alaska) Ted Stevens, and several high-ranking corporate executives of Broadcom, Inc. including one executive whose guilty plea was thrown out, have produced significant embarassment for the Justice Department.  (In fairness, these cases were investigated and the decisions to proceed to charging them were made during the Bush Administration, and some speculate -- although I offer no opinion and imply none -- that the Obama Justice Department does not mind embarassing the previous adminstration's stewards.)

One Justice Department memo sets forth new guidelines and offers reminders on other guidelines.  Here are some observations on the guidelines memo.

First, there is a passage (see the last paragraph in section A) which provides:

"Prosecutors should begin considering potential discovery obligations early in an investigation that has national security implications and should also carefully evaluate their discovery obligations prior to filing charges."

I would suggest that this policy should be extended to cover all investigations, not just ones involving national security.   The evaluation of discovery obligations earlier in the process may result in a more thoughtful, and ultimately correct, analysis of a case.   This in turn may lead to a more efficient disposition of investigations and, where investigations can be more readily ended, this frees up resources to devote to other cases.  I submit that getting a more efficient process, while also reducing the potential for errors or mistakes, should be important.

Section B, paragraphs 1 and 2 regarding items under "What to Review" prompt some concerns.  The inclusion of these paragraphs suggests that there has been a less than totally frank sharing of information between agencies (unless it is either deliberate or deliberately used as a convenient excuse to avoid or delay discovery) and raises the question as to whether some defendants have been prejudiced, or even whether some investigations have gone off on tangents (sometimes derided as "fishing expeditions") and in the process causing consternation and aggravation to some pretty innocent and hence undeserving targets.

Paragraph 2 sparks some curiouslty regarding a huge series of prominent corruption cases in New Jersey.   The paragraph begins as follows: 

2. Confidential Informant (CI)/Witness (CW)/Human Source (CHS)/Source (CS) Files: The credibility of cooperating witnesses or informants will always be at issue if they testify during a trial. Therefore, prosecutors are entitled to access to the agency file for each testifying CI, CW, CHS, or CS. Those files should be reviewed for discoverable information and copies made of relevant portions for discovery purposes. The entire informant/source file, not just the portion relating to the current case, including all proffer, immunity and other agreements, validation assessments, payment information, and other potential witness impeachment information should be included within this review.

I suspect that defense counsel for any of the 45 or so indicted or arrested individuals in "Bid Rig" investigations will be reviewing this memorandum, and looking at the foregoing paragraph in particular, with an eye on how much new information will be forthcoming regarding uber-cooperating witness Solomon Dwek.   These attorneys should be encouraged by the laundry list of relevant criteria regarding such witnesses which the memorandum also provides in Section B, paragraph 7, which reads as follows:

7. Potential Giglio Information Relating to Non-Law Enforcement Witnesses and Fed.R.Evid. 806 Declarants: All potential Giglio information known by or in the possession of the prosecution team relating to non-law enforcement witnesses should be gathered and reviewed. That information includes, but is not limited to:
  • Prior inconsistent statements (possibly including inconsistent attorney proffers, see United States v. Triumph Capital Group, 544 F.3d 149 (2d Cir. 2008))
  • Statements or reports reflecting witness statement variations (see below)
  • Benefits provided to witnesses including:
    • Dropped or reduced charges
    • Immunity
    • Expectations of downward departures or motions for reduction of sentence
    • Assistance in a state or local criminal proceeding

    • Considerations regarding forfeiture of assets
    • Stays of deportation or other immigration status considerations
    • S-Visas

    • Monetary benefits
    • Non-prosecution agreements
    • Letters to other law enforcement officials (e.g. state prosecutors, parole boards) setting forth the extent of a witness's assistance or making substantive recommendations on the witness's behalf
    • Relocation assistance
    • Consideration or benefits to culpable or at risk third-parties

  • Other known conditions that could affect the witness's bias such as:
    • Animosity toward defendant
    • Animosity toward a group of which the defendant is a member or with which the defendant is affiliated
    • Relationship with victim
    • Known but uncharged criminal conduct (that may provide an incentive to curry favor with a prosecutor)

  • Prior acts under Fed.R.Evid. 608
  • Prior convictions under Fed.R.Evid. 609
  • Known substance abuse or mental health issues or other issues that could affect the witness's ability to perceive and recall events
See Giglio v. United States, 405 U.S. 150 (1972).

Defense counsel may be remembering that notes of witness statements may be very crucial (and they may be wrong!).   Consider that Martha Stewart went to prison based largely upon evidence consisting of an agent's notes of Stewart's comments.   With those thoughts in mind, check out the following also in the aforementioned paragraph 7:

a. Witness Statement Variations and the Duty to Disclose: Some witnesses' statements will vary during the course of an interview or investigation. For example, they may initially deny involvement in criminal activity, and the information they provide may broaden or change considerably over the course of time, especially if there are a series of debriefings that occur over several days or weeks. Material variances in a witness's statements should be memorialized, even if they are within the same interview, and they should be provided to the defense as Giglio information.
b. Trial Preparation Meetings with Witnesses: Trial preparation meetings with witnesses generally need not be memorialized. However, prosecutors should be particularly attuned to new or inconsistent information disclosed by the witness during a pre-trial witness preparation session. New information that is exculpatory or impeachment information should be disclosed consistent with the provisions of USAM §9-5.001 even if the information is first disclosed in a witness preparation session. Similarly, if the new information represents a variance from the witness's prior statements, prosecutors should consider whether memorialization and disclosure is necessary consistent with the provisions of subparagraph (a) above.
c. Agent Notes: Agent notes should be reviewed if there is a reason to believe that the notes are materially different from the memorandum, if a written memorandum was not prepared, if the precise words used by the witness are significant, or if the witness disputes the agent's account of the interview. Prosecutors should pay particular attention to agent notes generated during an interview of the defendant or an individual whose statement may be attributed to a corporate defendant. Such notes may contain information that must be disclosed pursuant to Fed.R.Crim.P. 16(a)(1)(A)-(C) or may themselves be discoverable under Fed.R.Crim.P. 16(a)(1)(B). See, e.g., United States v. Clark, 385 F.3d 609, 619-20 (6th Cir. 2004) and United States v. Vallee, 380 F.Supp.2d 11, 12-14 (D. Mass. 2005).

It may be interesting to see whether these disclosure "reminders" -- because the "obligations" do not change -- have any impact on any of the numerous criminal cases and ongoing investigations of countless others.   Every large investigation -- such as the UBS tax evasion case, the Galleon hedge fund insider trading case, even the David Rothstein and Bernard Madoff "Ponzi" cases -- may be affected.  

Eric Dixon is a practicing attorney in New York and New Jersey, in addition to commenting regularly on Crime, Politics and Policy.   Mr. Dixon has engaged in complex investigations and research involving financial institutions and political figures.   Mr. Dixon does not represent anyone or have any connection to anyone mentioned or involved in any of the cases cited here. 

Mr. Dixon engages in select legal, economic and legislative analysis for clients on a professional, fee-for-service basis. Inquiries of Mr. Dixon may be directed to and by phone at 917-696-2442.  

Men Make Women Fat: Men Are Evyl - Breaking News!

(A brief digression from legal, economic and political matters.  Also, apologies for a salacious if inaccurate headline.)  (Hint:  Some big commentary is coming.)

Apparently women who have mates are heavier than their single, lonely counterparts, according to a new study (article link here).

Why is this surprising?   Just observe nature.   Isn't the spider who catches the fly bigger and healthier -- and much more satisfied -- than the spider who goes hungry?

I wonder how much of a correlation there is between having a mate, and life expectancy. 

So it's all men's fault.   It's the fault of that darned "Y" chromosome.   Henceforth, men are to be declared "evyl" -- that's spelled with a "y" because it's the "evyl" Y chromosome.   

Eric Dixon is a practicing attorney in New York and New Jersey and engages in select legal, economic and legislative analysis for clients on a professional, fee-for-service basis. Inquiries of Mr. Dixon may be directed to and by phone at 917-696-2442.

Tuesday, January 5, 2010

Loan Principal Reductions Will Trigger a New Economic Catastrophe

A new study from the New York Fed announces that reducing mortgage principal is the most effective way to keep homeowners in their homes, rather than simply reducing their monthly payments.

This seems to make sense, to a degree.  (Fairness -- that's another issue.  Keep reading.)  Real mortgage debt reduction equates to the creation of equity.   It is the loss of equity -- leading to homeowners being "underwater" -- which prompts many "homeowners" to just send the keys to the bank and walk away from their homes.   However, if this Fed idea is implemented, the real world effects will be catastrophic.

As for fairness, consider that responsible debtors who pay their bills on time, whether it be mortgages, school loans, car loans or business loans, will now be subsidizing the outright giveaway of equity to a select group of "homeowners."  Reducing the principal on mortgages is the same as creating equity in those homes, and is the same as someone handing these people a check.

Now, who is writing that check?   That's right -- it's you and me.   No one is reducing our debts.   But someone is saying that we should pay out of our own pockets so that others can keep "their" homes.   There you have it:  The reward for our responsibility is to pick up the responsibility of others who were not responsible.

There are basic fairness questions regarding the propriety of offering partial loan forgiveness to a select group of debtors -- which group may be particularly irresponsible -- instead of anyone, or everyone else.   While not every "underwater" homeowner is irresponsible, the facts remain that these people willingly made economic decisions when buying these homes.   They overpaid for these homes.   And it's not as if no one was talking about a "real estate bubble" back in 2003 or 2004 -- because industry and finance commentators were already sounding the alarms.   This group of homeowners made bad economic decisions, and now the New York Fed is saying that the rest of us -- who were much more risk-averse if not totally responsible -- should bear the burden for the risky, losing bets of these other people.

Here's a question:   If these homeowners saw their houses double in value, instead of decline in value by up to one-half, would the Fed be shouting for the newly-created largesse to be "shared equally"?   No.   Not on your life or mine.

A proposal to forgive loans en masse will force banks to realize losses immediately rather than trying to use various accounting rules to claim that certain declines in value are just "temporary" in order to avoid loss recognition.   Crime, Politics and Policy is all about confronting reality, and running towards it in fact when possible. 

However, the prospect of loan forgiveness for some, when the rest of the responsible borrowers get no relief while paying for the relief of others, is so unfair that it threatens to subvert the basic social compact of our society.   Once fairness ceases to be a bulwark of our society, people will feel emboldened to act callously and according to the "law of the jungle."   Civil order will be weakened, the rule of law will become mocked and increasingly disrespected, and those who play by the rules will be increasingly disadvantaged -- while being mocked by those who harbor no moral qualms about "working the system."  In such a society, those with capital will become much more hesitant to lend it out, on any terms, because they will be far less confident of being paid back, of having courts enforce contracts, of basic agreements and conventions being honored.   The end result, in the not-too-distant future, of a massive loan forgiveness / principal reduction program will be the significant tightening of bank credit on top of the tightening that has been occurring since 2007.   A new round of credit arterosclerosis will make all manner of financing much harder to obtain, at any rates or terms.   This in turn will have adverse consequences for every sector of our economy.  

Eric Dixon is a practicing attorney in New York and New Jersey and engages in select legal, economic and legislative analysis for clients on a professional, fee-for-service basis.   Inquiries of Mr. Dixon may be directed to and by phone at 917-696-2442. 

 new study from the New York branch of the Federal Reserve Bank announces that the most effective way to modify mortgages is to reduce the principal on those loans.

Saturday, January 2, 2010

Do-Gooders Making Things Worse: Commoditizing Health Care Is Bad Medicine

Several times in 2009 this blog reported that the various mortgage modification plans would not have the desired effect, and in fact would be likely to lead to bigger problems down the road.   In fact, on December 30, 2009 we reported that encouraging more "bad" loans would reduce the banks' ability to lend to other, better, more creditworthy borrowers and would create the perverse effect of having good borrowers unable to get credit because they were already subsidizing the credit and bad loans made to poor credit risks (some of whom qualify as out-and-out deadbeats).    Hence, deadbeat relief ends up costing everyone.

Now the New York Times reports in its Saturday edition that the Obama mortgage modification plan actually seems to be making things worse.

Point One:  Crime, Politics and Policy told you about this much earlier and we were among the first.   (Please, go check our archives on the right column.)

We believe the way to fix the real estate / mortgage / banking / credit messes is to stop all subsidies.   Everyone with a loss has to shoulder it.   Anything else is a form of "loss shifting" and merely moves the pain around from the one who caused it to someone else who was totally blameless.   In addition to being inherently unfair, such a philosophy encourages people to "self-insure" against future government interference as a means merely to be able to sustain future loss shifting.

We need to stop all aid to delinquent homeowners.   We need to let all these houses go into foreclosure.   Yes, this will drop home prices a lot...short term.   However, government interference is only artificially propping up prices.   Savvy investors know this and are still not buying.   The smart money appears to be on the sidelines (as some of it has been since 2003). 

We need to let any and all bad banks fail, and fail quickly.

When you have a bandage and want to pull it off, you can either pull it off very slowly (and extend your pain), or rip it off suddenly and get it over with.   The pain is arguably equal -- ripping it off ends the pain sooner -- and just as arguably, the pain might actually be less when you rip it off.   Let's do the same here.

Point Two:  We predict the same thing will happen with the health "reform" bill, which will simply accomplish everyone getting "health insurance" (and likely paying much more in the process) but not necessarily getting "health care" whether in the quantity or quality they want or need.   In fact, the health "reform" bill just passed will be likely to cause health care rationing by arbitrarily penalizing doctors whose prescriptions for "care" are in the top tenth of all doctors (meaning that 10% of doctors get penalized, regardless of the amount of care).    This is sure to cause a downward spiral (or death spiral) in the amount of health care.   But this is what will happen, when the health care system becomes more concerned about "cost control" and "cost certainty" than it is about actual patient care.

In short, when medicine becomes a pure business, health care will suffer, and people will suffer -- and die -- because they are denied or delayed the appropriate medical care.

Perhaps the final flaw with the so-called health reform is that it mistakenly assumes that the behavior of doctors can be regulated perfectly.   It seems to assume that doctors will continue to exercise the appropriate patient-first care.   However, there are plenty of doctors (as in other regulated industries) who put simple economics first (not that there's anything wrong with this).   They will be saying, "I want to do this procedure, but I can't because I'll be penalized."   The reform bill seems to assume that doctors will voluntarily absorb the financial penalties in order to fulfill their higher calling.  (Gee, who thought that the "death panels" would turn out to be Congress?)

Lesson to government:   If you want service providers (whether it be medicine, or law) to treat their profession like a vocation, do not treat their profession like a business.   Treat it as a vocation, and its practitioners will do likewise.   Treat it as a business to be "cost controlled," and do not expect its practitioners to do anything but look at the financial bottom line first -- and only -- in determining what care to provide, and even whether to continue in business.

These disasters occur when bureaucrats put a premium on trying to look good and show how much they care, instead of actually measuring the likely effects of their policies. 

Eric Dixon is a practicing attorney in New York and New Jersey and engages in select legal, economic and legislative analysis for clients on a professional, fee-for-service basis. Inquiries of Mr. Dixon may be directed to and by phone at 917-696-2442.